The British state should create and subsidise paid jobs for thousands of disabled young people as part of an “opportunity revolution” aimed at reversing years of labour market discrimination, the Milburn review of youth employment will recommend.

The review, due to report this month, will say the government should introduce “flexi-jobs” alongside employment subsidies and intensive skills support to make it easier for disabled and chronically ill 16- to 24-year-olds to get work.

It will argue that the state should step in to underwrite jobs for young people who are locked out of employment and training opportunities, as part of an overhaul of what it sees as an outdated welfare and skills system.

About a million young people are now classified as “Neet”, meaning they are not in education, employment or training. Nearly half (45%) of those are disabled or in ill health. Disabled young people are three times as likely to be Neet as their non-disabled peers.

The review’s author, the former Labour cabinet minister Alan Milburn, has described soaring numbers of Neets as a moral and economic crisis, warning that failure to tackle rising youth disengagement from work risks creating a “lost generation”.

He has rejected what he has called “myths” about young people being “snowflakes”, insisting that the crisis in youth mental health is real, most youngsters want to work, and it is the duty of government and employers to provide support and opportunities.

The review will say young people with disabilities need a flexible and supportive approach to work that acknowledges fluctuating medical conditions and lack of work experience, and recognises the importance of part-time roles in helping them build confidence.

One eye-catching recommendation is for the UK to adopt a Danish-style “flexi-job” scheme. This guarantees disabled participants employment while allowing them to set working hours – in some cases starting with as few as four hours a week – that suit their individual capacities, with wages topped up by the government.

It will also call for creative ways of shaping jobs to individual capabilities, such as “job carving”: splitting the three component parts of a single entry-level role and matching youngsters to each of those roles. A retail role that comprises stock-filling, till work and locking up would become three job opportunities.

Nearly half of 24-year-old Neets have never worked, and Milburn argued in his interim report earlier this year that abandoning a cohort of Covid-era youngsters coping with high levels of depression, anxiety, autism and ADHD would have a scarring effect on their life chances and lifetime earnings.

Although the government has said it will not endorse “crude cuts” to benefits, Milburn has suggested that the state should switch some of the £4bn a year it spends on disability benefits for young people into comprehensive, high-quality employment and training support.

However, he will probably face pushback from campaigners, and potentially backbench Labour MPs, who argue that job support should not be funded by disability benefit cuts that would push many young people into poverty and further away from the job market.

Milburn’s proposals are in part a recognition that young people with disabilities face huge barriers around recruitment processes and inflexible job design, and many businesses are unlikely to create job opportunities for them without government support.

The plans have echoes of the postwar Remploy scheme, which created state-funded workplaces providing “sheltered” employment for disabled ex-service personnel. At its height, Remploy had 90 factories across the UK, the last closing in 2013.

The review will urge large employers to voluntarily adopt employment targets for disabled 16- to 24-year-olds, although it is expected to stop short of recommending statutory quotas.

As well as creating jobs, the review will call for a boost for job support, including supported internships, placements, specialist job matching and coaching, and support for employers to provide workplace adjustments.

Milburn who has been critical of the limited ambitions of existing government job support programmes, has previously called for a “turbo-charging” of specialist internships for young people with special educational needs who are moving on from school and college.

The most common conditions reported by disabled Neets were depression, bad nerves or anxiety (23.8%), followed by autism (22.7%) and other health problems or disabilities (18.5%), according to the latest official figures.